What is Capital Protection Oriented Funds (CPOF)?

What is Capital Protection Oriented Funds (CPOF)?

• CPOF is a close ended hybrid fund, which primarily endeavours to protectcapital with a secondary objective of providing growth opportunities, overthe long term

• Generally CPOF invests predominantly into debt and a small portion ofportfolio in equities

– Debt : investment in debt asset class is done with a view that the invested portion grows toatleast 100% of the portfolio value over the tenure of the scheme.

– Equity : A small portion of the portfolio is invested into equities, with a view to provide capitalappreciation over the long term

• Suitable for conservative investors who are not comfortable with interestrate risk and high equity market volatility

Portfolio structuring endeavors to provide capital protection as well as growth opportunities, without undertaking any significant risk

2

✓ Capital Protection Oriented Fund is suitable for conservative investor with a potential for growth over the long term

Solution for Conservative Investors

Expected Volatility

Ex

pe

cte

d R

etu

rns

Capital Protection Fund

Arbitrage Fund

Equity Savings Fund

The above illustration is for indicative purpose only.

The above chart is not drawn according to scale and is not based on any historical data. Taxes, expenses and any other associated costs have not

been taken into consideration Past performance is not indicative of future returns.

Equity Hybrid Fund

Liquid Fund

Asset Allocation Fund

Equity Fund

Debt Hybrid Fund

3

The need for conservative investor to add equities in the portfolio

• Traditional savings instruments in India has seen a declining

interest rate scenario in the past 2 decades

Rate of Return (%)

Final Corpus ( Rs Crores)

12% 2.70

11% 2.21

10% 1.81

9% 1.49

8% 1.22

7% 1.01

• Our previous generation had the

choice of investing in high yielding

instruments

• However, with interest rate now in

the range of 6.5%-8% there is a

need to add equities to the portfolio

Scenarios for Rs 1 lakh invested every year for 30 years, at varying rate of interest

Source: Bloomberg, www.sbi.co.in, Internal.

Past performance is not indicative of future returns.

3%

4%

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Trend in Interest Rates(%) (1997-2018)

PPF SBI 3 years Term Deposit

4

5%

6%

7%

8%

9%

10%

11%

12%

13%

4% 6% 8% 10% 12% 14% 16%

Risk Return Characteristics

Adding equities in small proportion can help the portfolio

Risk

Return

100% debt, 0% equity

90% debt, 10% equity

0% debt, 100% equity

80% debt, 20% equity

The chart shows the risk and returns characteristics for portfolios with

varying debt and equity allocation for the last 3 years (2015-2018)

Source: ICRA MFIE. Equity is represented by Nifty 50 and debt is represented by Nifty 10 Yr benchmark Gsec Index. Risk

is denoted by standard deviation of daily returns for the last 3 years. All values are annualized. Associated cost and

expenses have not been taken into consideration. Past performance is not indicative of future returns. The above chart is

for illustrative purposes only.

✓ Adding little bit of equities to a pure debt portfolio, canhelp in generating risk-adjusted returns

✓ Low correlation between equity and debt asset can helpto diversify risk

✓ Equities can help in generating alpha over the long term

5

Asset Allocation – Scenario Analysis

6.00% 7.00% 8.00% 9.00%

-20% 2.89% 3.79% 4.69% 5.60%

-10% 3.90% 4.79% 5.68% 6.56%

0% 5.14% 6.01% 6.88% 7.74%

10% 6.62% 7.46% 8.30% 9.15%

15% 7.45% 8.28% 9.11% 9.94%

Returns shown above are for investments held for 3 years without rebalancing. Expenses have not been considered.

This is for illustrative purposes only.

A measured equity allocation could boost overall performance at a

moderate risk level

Equity allocation: 15%,

Debt allocation: 85%

Annualized return

on debt component

6.00% 7.00% 8.00% 9.00%

-20% 3.95% 4.88% 5.82% 6.76%

-10% 4.61% 5.54% 6.46% 7.39%

0% 5.43% 6.34% 7.25% 8.17%

10% 6.41% 7.31% 8.20% 9.10%

15% 6.97% 7.85% 8.74% 9.63%

Annualized return

on debt component

6.00% 7.00% 8.00% 9.00%

-20% 4.98% 5.95% 6.92% 7.89%

-10% 5.31% 6.27% 7.24% 8.20%

0% 5.72% 6.67% 7.63% 8.58%

10% 6.21% 7.15% 8.10% 9.05%

15% 6.49% 7.43% 8.37% 9.32%

Annualized return

on debt component

Annualized return on

equity component

Equity allocation: 10%,

Debt allocation: 90%Equity allocation: 5%,

Debt allocation: 95%

Annualized return on

equity component

Annualized return on

equity component

6

Presenting,

SBI Capital Protection Oriented Fund Series A (Plan 1)

The scheme is ‘oriented towards protection of capital’ and not ‘with guaranteed returns’. Further the orientation towards

protection of capital originates from the portfolio structure of the scheme and not from any guarantee, insurance cove etc.

7

Product Information

• The scheme is a close-ended capital protection oriented scheme. The scheme endeavors to protect thecapital by investing in high quality fixed income securities that are maturing on or before the maturity ofthe Scheme as the primary objective and generate capital appreciation by investing in equity and equityrelated instruments as a secondary objective. However, there can be no assurance or guarantee that theinvestment objective of the scheme will be achieved. The Scheme is “oriented towards protection ofcapital” and not “with guaranteed returns”. Further, the orientation towards protection of the capitaloriginates from the portfolio structure of the scheme and not from any bankguarantee, insurance coveretc.

Investment

Objective

• Debt instruments (including debt derivatives) and Money market instruments (including Triparty Repo,Reverse repo) : 80% -100%

• Equity and equity related instruments (including derivatives and ETFs) : 0% - 20%

Asset

Allocation*

• The Scheme endeavors to protect capital by investing a portion of the portfolio in highest rated debtsecurities & money market instruments and also to provide capital appreciation by investing the balancein equity and equity related securities. The debt and money market instruments would bring about thestability of returns in the scheme. The equity portion of the scheme will invest in diversified portfolio ofEquities & Equity Related instruments. The fund will follow a mix of bottom-up & top-down approach tostock-picking. The Scheme will primarily focus on companies that have demonstrated characteristics suchas market leadership, strong financials and quality management. The scheme is “oriented towardsprotection of capital” and not “with guaranteed returns.” It shall also be indicated that the orientationtowards protection of capital originates from the portfolio structure of the scheme and not from anybank guarantee, insurance cover etc.

Investment

Strategy

* For detailed asset allocation please refer slide no 14

8

Capital Protection through Portfolio Orientation

• Capital protection orientation is expected to be achieved through investing in high credit quality debt securities

• The scheme would invest in AAA and equivalent rated corporate papers, Gsec and SDLs predominantly

• The maturity of the debt security not to exceed the tenure of the scheme, thereby not undertaking any significant interest rate risks

9

Capital Protection through Portfolio Orientation contd…

Example of Capital Protection through Portfolio Orientation:

Assumptions:

• Maturity of debt security reasonably matched with scheme’s tenure

• Coupons reinvested at 4% p.a

• Assumed YTM of 3 years AAA rated bond is at 8.00%

Thus for e.g.,

➢ A bond with coupon of 9%, residual maturity of 3 years and face value of Rs 1000 is expected to be trading at Rs 1025.77

➢ The effective return over 3 years will be approx. 7.69%

➢ By investing Rs 80.08 at the beginning, we can expect it to grow to Rs 100 at the end of 3 years

➢ The remaining Rs 19.92 can be invested into equities, after adjusting for the expenses and associated costs

Key Risks to above assumptions and calculations:

➢ Partial or full Default of underlying securities

➢ Coupon reinvested at lower rates

This is only an example to show how the protection of capital originates from the portfolio structure. Please consult your financial advisor before

taking any decision of investment.

Source: Bloomberg, Internal. The above illustration is for indicative purpose only.

10

Key Information

Scheme Name SBI Capital Protection Oriented Fund – Series A (Plan 1)

Type of Scheme A close ended Capital Protection Oriented Scheme

Fund Manager Mr. Rajeev Radhakrishnan ( for Debt portion) Mr. Ruchit Mehta (for equity portion)

Benchmark Index CRISIL Hybrid 85+15 Conservative Index

Minimum Application Amount Rs. 5000/- in multiples of Re.1 thereafter

Plan / Options Direct / Regular. The plan will have Growth option only.

Exit Load N.A. Since the Scheme will be listed on Stock Exchange there will not be any Exit Load.

Tenure of the scheme 1285 Days

Rating The Schemes’ portfolio structure has been rated CARE AAAmfs (SO) by CARERatings Ltd. The rating given by CARE Ratings Ltd. would be reviewed on aquarterly basis as required under SEBI Circular dated SEBI/IMD/CIR No.9/74364/06 dated August 14, 2006.

Listing The Units under the Scheme will mandatorily be listed on NSE. Further, the AMC may at its discretion list the units on any Stock Exchange.

11

Who is this fund suitable for?

• Conservative investors investing in traditional savings instruments

• First time mutual fund investors. First time equity investors.

• Investors in small savings schemes

• Senior citizens, retired persons

12

Tax Efficiency – 3 years + investment horizon

Illustration - how indexation over the long term offers tax efficiency

Actual returns may vary based upon prevalent market conditions and rates. Please consult your tax advisor for actual tax implications. ^QuarterlyCompounding has been taken for Traditional avenues. *Cost Inflation Index (CII) is based on the year of investment and that of the year of redemptioni.e. 2014-15 and 2018-19 respectively and the rates used are actual rates prescribed by Income Tax authorities for these years. # For Term Deposit -including 4% Health and Education cess. # For Capital Protection Oriented Fund -20% with indexation & including 4% Health and Education cess.The above is only an example to show the method of calculating capital gain tax payable by an investor with indexation and should not be construed tobe an investment or tax advice of any nature. There is no assurance or guarantee of future performance of any scheme of SBI Mutual Fund. Thecalculation is based on prevailing tax laws. Please consult your tax/financial advisor before taking any decision of investment.Year wise Cost Inflation Index (CII) : 2014-15 - 240, 2015-16 – 254, 2016-17 – 264, 2017-18 – 272, 2018-19 - 280

Particulars

Capital Protection Oriented Fund

Traditional Avenue

(with Indexation benefits)10% tax

slab20% tax

slab30% tax

slab

A Amount Invested 1,00,000 1,00,000 1,00,000 1,00,000

B Term of Investment (in days) 1,200 1,200 1,200 1,200

C Investment Yield 8.00% 8.00% 8.00% 8.00%

D Maturity Value^ = A*(1+C)^(B/365) 1,28,791 1,29,747 1,29,747 1,29,747

E Initial Cost of Investment 1,00,000 1,00,000 1,00,000 1,00,000

F Indexed Cost of Investment* = (A/240)*280 1,16,667 NA NA NA

G

Taxable Capital Gains = D-F (Cap Pro), D-A (Fixed Deposit)

12,125 29,747 29,747 29,747

H Applicable Tax Rate# 20.80% 10.40% 20.80% 31.20%

I Amount of Tax = G*H 2,522 3,094 6,187 9,281

J Maturity Value (Post Tax) = D-I 1,26,269 1,26,654 1,23,560 1,20,466

K Absolute Returns (Post Tax) 26.27% 26.65% 23.56% 20.47%

L CAGR Investment Yield (Post Tax) 7.35% 7.45% 6.65% 5.83%

13

Asset Allocation Details

Indicative Asset Allocation (% of total assets)Risk Profile

(High/Medium/Low)Instruments Minimum Maximum

Debt instruments (including debt

derivatives) and Money market

instruments (including Triparty

Repo, Reverse repo)

80% 100% Low to Medium

Equity and equity related

instruments (including derivatives

and ETFs)0% 20%

High

The Scheme may invest in securitized debt up to 40% of the net assets of the scheme.

The Scheme may invest in Repo in corporate debt as permitted by SEBI.

The scheme shall not engage in short selling.

The Scheme may engage in stock lending up to 10% of its net assets.

The cumulative gross exposure through equity, debt and derivative position will not exceed 100% of the net assets of the scheme.

The scheme may invest in ADRs/GDRs issued by Indian Companies, subject to the guidelines issued by Reserve Bank of India

and Securities Exchange Board of India.

The gross exposure to derivatives in the equity segment shall be restricted as per the individual equity asset allocation tablesmentioned above. Moreover, it may be noted that the Debt derivatives would be used only for hedging and portfolio rebalancing.

14

Product Labeling

This product is suitable for investors who are seeking*

• A close-ended Capital Protection oriented fund medium to long term

• Investment in fixed income instruments to protect capital and investment in equity and equity related instruments for capital appreciation

*Investors should consult their financial advisors if in doubt whether this product is suitable for them.

15

Disclaimer

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

This presentation is for information purposes only and is not an offer to sell or a solicitation to buy any mutual fundunits/securities. These views alone are not sufficient and should not be used for the development orimplementation of an investment strategy. It should not be construed as investment advice to any party. Allopinions and estimates included here constitute our view as of this date and are subject to change without notice.Neither SBI Funds Management Private Limited, nor any person connected with it, accepts any liability arising fromthe use of this information. The recipient of this material should rely on their investigations and take their ownprofessional advice

SBI Funds Management Private Limited

(A joint venture between SBI and

AMUNDI)

Registered Office:

9th Floor, Crescenzo, C-38 & 39, ‘G’

Block,

Bandra Kurla Complex, Bandra (E),

Mumbai - 400 051

Board line: +91 22 61793000

Fax: +91 22 67425687

Call: 1800 425 5425

SMS: “SBIMF” to 56161

Email: [email protected]

Visit us @ www.facebook.com/SBIMF

www.sbimf.comWebsite

Visit us @ www.youtube.com/user/sbimutualfund

16